No. 13 (tie) Sonic: Improving economy could help fast food chain
BY LAURIE WINSLOW World Staff Writer
Sunday, September 16, 2012
9/16/12 at 7:36 AM
Many restaurant stocks have struggled over the last few years, mainly because of the slow recovery from the 2008-2009 recession.
But an improving economy could help a company such as Sonic Corp., which has drive-in restaurants located coast to coast, said Jake Dollarhide, CEO of Longbow Asset Management Co.
"I think the economy will improve, and the stock market will have a good year, and lesser-known stocks like Sonic ... could have a really good year," Dollarhide said.
Oklahoma City-based Sonic originally started as a hamburger and root beer stand called Top Hat Drive-In in 1953 in Shawnee before changing its name to Sonic in 1959. Today, Sonic has more than 3,500 drive-ins across the country, where approximately 3 million customers eat every day.
For its fiscal third quarter, which ended May 31, Sonic reported that estimated same-store sales systemwide increased 2.8 percent. On a two-year basis, estimated same-store sales improved by 6.7 percent in the third quarter.
For the first nine months of fiscal 2012, Sonic reported a net income of $21.6 million, or 36 cents a diluted share, compared with $6.9 million, or 11 cents per share, for the same period in 2011.
A stumble in the economic recovery or double-dip recession would pose potential downsides to Sonic, Dollarhide said.
If the unemployment rate increases, particularly in healthy markets such as Oklahoma, Nebraska and Iowa where the rate has been between 4 percent to 6 percent compared to a higher national average, that would impact the restaurant chain, he added.
"Consumer habits change according to how the economy is doing. ... If they have a job, that is the No. 1 barometer as far as whether they will spend money or not," Dollarhide said.
Earlier this year, Sonic completed a $30 million share repurchase program. In August, the company announced a stock repurchase program for up to $40 million worth of common stock through Aug. 31, 2013.
The company expects its operations to generate free cash flow of approximately $50 million to $55 million for fiscal 2012.
Address: 300 Johnny Bench Drive, Oklahoma City, OK, 73104
Chairman/CEO: J. Clifford Hudson
President: W. Scott McLain
CFO: Stephen C. Vaughan
Symbol (Exchange): SONC (Nasdaq)
Operation: Franchises and operates a chain of drive-in restaurants.
Original Print Headline: Improving economy could help chain
Laurie Winslow 918-581-8466
American style hot dog from Sonic. Courtesy